House prices will stop falling before the end of the year, but mortgages will remain out of reach of many first-time buyers, a leading economist said today.

Speaking at the Building Societies Association annual conference yesterday, Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, said he expected house prices to stabilise from the middle of this year and that reports of an overall 45% decline in prices were overly-pessimistic. "I think the overall decline will be more like 25%-30%," he said.

"I think we will see lenders coming out with more interesting packages, but these will entail being tied into another product," he said. "I don't see a big return to 90%-95% lending."

He added that buyer enquiries had risen over the past six months, but there had been a corresponding decrease in the amount of property on offer.

"This is partly because there are fewer distressed sales [people being forced to sell] – partly because home information packs may have put off speculative sellers and partly because people are still reluctant to sell at a price below what they think their property is worth," he said.

Contrary to expectation when the credit crunch began, the London property market had been the most, not the least, buoyant in England and Wales, Rubinsohn said. "Buyer enquiries have risen particularly in London. Our members are picking up on a lot of potential interest from overseas buyers."

He added that it would be a "reasonable guess" to expect interest rates to rise to 5% over the next three years.